a. Andre has a salary of $1000. He spends his entire budget on shoes and beers.The cost for a pair of shoes is $15 and the cost for can of beer is $25.i.Construct Andre's budget constraint (place) beers on the y-axis.ii.Suppose Andre's salary rises by 25%. Also suppose that the price ofshoes and beers each rise by 40%. Construct Andre's new budgetconstraint. What is the difference between the new and old budgetconstraints?Suppose that the price of beers fell from $25 per beer to $15. ConstructAndre's new budget constraint. What is the difference between the newand old budget constraints.iii.b. Explain the relationship between the budget constraint and indifference curveat consumer optimum.

Budget constraint: 1000 = 15S + 25B where S: Shoes and B: Beer When S = 0, B = 40 (vertical…

a. Andre has a salary of $1000. He spends his entire budget on shoes and beers. The cost for a pair of shoes is $15 and the cost for can of beer is $25. i. Construct Andre's budget constraint (place) beers on the y-axis. Suppose Andre's salary rises by 25%. Also suppose that the price of shoes and beers each rise by 40%. Construct Andre's new budget ii.

a. Andre has a salary of $1000. He spends his entire budget on shoes and beers. The cost for a pair of shoes is $15 and the cost for can of beer is $25. i. Construct Andre's budget constraint (place) beers on the y-axis. Suppose Andre's salary rises by 25%. Also suppose that the price of shoes and beers each rise by 40%. Construct Andre's new budget ii.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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